joint transportation committee pilotage best practices...

Joint Transportation CommitteePilotage Best Practices Review

December 14, 2017

Spencer Cohen, PhD

Senior Economist, Community Attributes Inc.

Mark Gleason

President, Gleason & Associates

Meeting Agenda

1. Project Overview

2. Recommendationsa. Addressing Lack of Diversity in Pilotage

b. Analytically Driven Tariff and Fee Rate Setting

c. Effective Oversight of Marine Pilotage Activities

3. Discussion and Q&A

December 14, 2017 JTC Presentation 2

Project Background and Purpose

• Project timeline: July 2017 to January 2018

• Scope of Work• Review and assess existing practices in Washington state

pilotage

• Identify best practices and compare with Washington state

• Provide recommendations to the Legislature to improve Washington state pilotage

• Project Team• Community Attributes Inc.

• Gleason & Associates

September 14,

2017WA STATE JTC 3

Addressing Lack of Diversity in Pilotage

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Finding #1: Lack of Data on Gender and Ethnicity

• Problem Statement• No formal data collection on gender and ethnicity

of pilotage exam applicants

• Very little data regarding gender and ethnicity of licensed pilots and trainees. What little information exists is anecdotal at best

• Local and national problem

• Board of Pilotage Commissioners ill equipped to: 1) establish a baseline; and 2) track progress on improving diversity


Finding #1: Lack of Data on Gender and Ethnicity

• Recommendation• Develop voluntary data collection protocol to track

gender and ethnicity among pilotage exam applicants, trainees, and licensed pilots

• Who • BPC

• Resource Requirements• Could include modification of existing application to

allow for self-identification

• Low-cost, voluntary electronic survey

• Expected Outcomes• Ability to evaluate progress and impact of subsequent

efforts to improve diversity among applicants, trainees, and licensed pilots


Finding #2: Evidence of Potential Subjectivity and Bias in Training and Evaluation

• Problem Statement• Past allegations of subjectivity and bias have lead to increased

awareness of the need to be more inclusive and welcoming of women and minorities

• Efforts underway include establishment of the Joint Diversity Committee, the “Train the Trainer” program, and hiring of outside experts to review exam and training program

• Recommendation• Expand and continue to improve upon efforts to minimize subjectivity

and eliminate bias in the application, training, and licensing process

• Who • BPC

• Resource Requirements• Resources to support Joint Diversity Committee• Further expansion of the “Train-the-Trainer” Program • Continued support for outside expert to review & consultation

• Expected Outcomes• Minimize the risk that otherwise qualified candidates are not licensed due

to explicit or inadvertent discrimination and/or bias in the application, training and selection process


Finding #3: Lack of Diversity Endemic in Maritime Industry

• Problem Statement• The pool of qualified pilotage applicants directly comes from

the maritime industry

• The industry struggles with diversity across all sectors

• Multiple factors contribute • Traditional avenues of recruitment

• Nepotism in some areas

• Challenging workplace environment

• Perceptions and stereotypes about gender and ethnicity

• This challenge is beyond the scope and capabilities of any one agency or organization

• Need for a more holistic approach leveraging resources and expertise

• Government

• Private Sector


Finding #3: Lack of Diversity Endemic in Maritime Industry

• Recommendation• Establish a statewide Task Force on Maritime Sector Workforce

Development, with a specific focus on increasing diversity • Dept. of Commerce, Dept. of Transportation/WSF, State Workforce

Board, OFM Asst. Director for HR• Pilots, ports & terminal operators, shipyards, tug & barge, shipping

companies, recreational & commercial fishing, recreational boating, organized labor, marine transportation, research & technology, education, training providers, and youth programs

• Develop timeline and deliverables upon convening• Can coordinate with existing efforts already underway• Task Force not intended to replace Joint Diversity Committee

• Who• Legislature, in coordination with Governor’s Maritime Sector Lead

• Resource Requirements• Staff to support Task Force

• Expected Outcomes• A statewide strategy for a more inclusive maritime workforce, resulting in

a more diverse pool of potential pilots


Analytically Driven Tariff and Fee Rate-Setting

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Two Approaches

• Option A (Preferred Alternative)• Transfer tariff and fee rate-setting authority to

the Washington Utilities and Transportation Commission (UTC)

• Option B• Address existing tariff and fee rate-setting

issues within the current structure of the BPC


Option A: Transfer Rate-setting Authority to the

Washington Utilities &Transportation Commission (UTC)

• Most effective action Legislature can take

• Will require legislative changes to Pilotage Act

• Findings (to be discussed in subsequent slides) can be addressed through the structure, rules, expertise, and rigor of the UTC process

• Extensive research on similar models (Maryland, Oregon, and Virginia) point to the benefits of the public utility model

• Commissioners do not have direct material interest in rate cases w/UTC model

• UTC assessment on Pilots to cover costs, recoverable in tariff

• All parties will benefit from a process that is rules-based, enforceable, predictable, rigorous, and transparent



Option B: Address existing tariff and fee rate-setting within the current structure of the BPC

Finding #4: Annual Tariff and Fee Rate-Setting Unnecessary

• Problem statement• Pilotage Act requires the BPC to “annually fix the

pilotage tariffs for pilotage services”• Annual requirement incentivizes stakeholders to

continuously advocate, either explicitly or implicitly, for adjustment

• Serves as a distraction and limits discussion on other important items under BPC jurisdiction, such as safety

• Research indicates annual tariff and fee rate-setting rare • Many states set rates on “as needed” basis

• Two+ years duration also common

• Stakeholders agree annual process too frequent


Finding #4: Unnecessary to Review Tariff and Fees Annually

• Recommendation• Revise the RCW such that tariff and fee rate-setting reviews occur

only at the request of stakeholders• Define (in WAC) “economic and financial hardship” • Establish evidentiary, petition-based process for tariff and fee

rate-setting adjustment• Process to include (at minimum)

• Notice to file a petition• Petition filing & timeline for data submission

• Who• Legislature (statutory changes) and BPC (administrative rule

changes)

• Resource Requirements• Existing staff time

• Expected Outcomes• Rate hearings will reflect economic necessity rather than arbitrary

timelines. Stakeholders incentivized to arrive at a mutually beneficial solution outside the hearing process


Finding #5: No Clearly Defined Methodology for Tariff and Fee-Rate Setting Process

• Problem Statement• The Board makes decisions on tariff adjustments

without the benefit of an established and agreed upon methodology nor consistent indicators and variables to be considered• Pilot compensation

• Retirement benefits

• Operating expenses

• Capital expenditures

• Lack of staff capacity to provide objective analysis, resulting in stakeholders often providing data interpretation


Finding #5: No Clearly Defined Methodology for Tariff and Fee-Rate Setting Process

• Recommendation• Hire a staff analyst or consulting economist to develop and

administer an evidentiary-based process and include data analysis

• Consider use of an automatic adjuster in several states contributes to greater predictability for stakeholders

• Who• Legislature and BPC

• Resource Requirements

• Additional resources to support full time or part-time staff or consulting economist

• Expected outcomes• More predictable and transparent tariff and fee rate-setting

process based on defined methodology and independent, objective analysis


Finding #6: Data Submission not Aligned with Tariff and Fee Rate-Setting Process

• Problem statement• There is a lack of consistency, clarity, and timeliness

in the submission of data necessary to make informed rate adjustment decisions

• There is no established enforceability of a timeline for data submissions


Finding #6: Data Submission not Aligned with Tariff and Fee Rate-Setting Process

• Recommendation• Include language in WAC requiring Pilots and/or Associations

submit

• Quarterly assignment-level data on revenues generated by tariff and fee charge AND vessel type

• Current year budget and future budget projections

• No rate adjustment may be considered if the timeline and submission requirements are not met

• Who• BPC

• Resource Requirements• Electronic password-protected database of invoices may be one

option for gathering and inventorying this information, and could be paid for through a surcharge

• Expected Outcomes• Better alignment between data submission and decision-making

on tariff and fee rate adjustment petitions


Finding #7: Significant Uncertainty Regarding Capital Expense Financing

• Problem statement• No defined, rigorous, and enforceable process for

evaluating pilotage capital expenses (e.g., replacement of a pilot boat, personal pilotage units)

• No timely submission of key data, funding plans, and other relevant information needed to make informed decisions on financing requirements

• Difficult to track tariff and/or fee performance necessary to finance these expenses


Finding #7: Significant Uncertainty Regarding Capital Expense Financing

• Recommendation• As part of petition-based adjustment process, Pilots must submit a

funding plan, including capital projections • Establish a Transportation Oversight Committee

• Reviews submitted requests for tariff and fee-based financing of capital expenses

• Provides approval or denial recommendation to BPC• Committee should include both maritime and financial subject

matter expertise• Consider using a one-time or defined-period surcharge rather than a

general tariff increase• Include binding funding plan w/expiration date for temporary

adjustment

• Who• Legislature and BPC

• Resource Requirements• Existing staff

• Expected Outcomes• Transparency & predictability regarding capital expense financing


Effective Oversight of Marine Pilotage Activities in Washington State

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Finding #8: BPC Composition May be Sub-optimal with Respect to Tariff and Fee Rate-Setting

• Problem Statement• Pilots and industry have equal representation on

the BPC

• Predictably, they often vote in the own self interest, leaving the remaining Commissioners to cast deciding votes

• With the frequent abstention of agency representatives, the three remaining Commissioners actually cast deciding votes

• These Commissioners represent the public interest and environmental considerations, but may not have relevant financial expertise


Finding #8: BPC Composition May be Sub-optimal with Respect to Tariff and Fee Rate-Setting

• As previously discussed, our preferred alternative is to transfer tariff and fee rate-setting authority to the UTC

• However, if the Legislature chooses the option for rate-setting authority to remain within the BPC, we believe the following recommendations will mitigate against this sub-optimality:• An evidentiary, petition-based process

• A clearly defined methodology and timeline

• Increased staff capacity sufficient to provide unbiased, objective analysis


Discussion and Q&A

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